Increasing costs for small businesses struggling to stay afloat may cause lasting damage
AUGUSTA (Jan. 28, 2021) — NFIB, the leading small business association in Maine and the nation with thousands of members in the state, is grateful to Gov. Janet Mills for reconsidering how Paycheck Protection Loans will be taxed by the state. Congress voted to not tax the forgivable loan proceeds if employers spent the funds on payroll, rent, and utilities, and recently passed a provision to allow deductions for those PPP loan expenses. A representative of the state tax bureau testified earlier this week before a legislative committee that the state was proposing it not follow the federal government’s lead on allowing deductions for those forgivable loan-related expenses, an estimated $100 million tax impact on affected PPP loan recipients.
“Right now so many small businesses in Maine hard-hit by pandemic closures and restrictions are barely hanging on due to government-imposed public health protections that began last March limiting their ability to bring in sales revenue, so we are grateful to the Governor for reconsidering the initial tax policy that would raise small business costs,” said David Clough, state director of NFIB in Maine.
“Last April small businesses took the PPP loans when they were in financial turmoil and worked hard to follow the federal rules to keep employees on the job and getting paid. Doing that increased payroll costs for the employers and any PPP loan-related expenses should be deductible at the state level just as they are at the federal level,” added Clough.
In Maine, 24,311 private sector small businesses received loans of up to $150,000, and another 2,614 received loans of over $150,000 according to December data from the U.S. Treasury. An NFIB survey in December of small business owners showed that one-in-four (25%) of small business owners report that they will have to close their doors if current economic conditions do not improve over the next six months.
